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Promoting Product Market Competition to Reduce Unemployment in Europe: An Alternative Approach?

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  • Gersbach, Hans

Abstract

In this paper, we employ general equilibrium reasoning to review whether product market reforms could help to reduce unemployment in Europe. We consider three potential effects of product market reforms: lowering markups, fostering productivity gains and inducing a more rapid expansion of the product mix. We argue that product market reforms will help to reduce unemployment under most circumstances. Productivity improvements will increase aggregate unemployment only if workers are immobile and unemployment is concentrated in a few sectors. Employment effects remain positive or are even reinforced if wage adjustments occur. Using recent industry studies, we suggest that product market reforms can reduce unemployment significantly, but labor market reforms remain unavoidable nevertheless. Copyright 2000 by WWZ and Helbing & Lichtenhahn Verlag AG

Suggested Citation

  • Gersbach, Hans, 2000. "Promoting Product Market Competition to Reduce Unemployment in Europe: An Alternative Approach?," Kyklos, Wiley Blackwell, vol. 53(2), pages 117-133.
  • Handle: RePEc:bla:kyklos:v:53:y:2000:i:2:p:117-33
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    Cited by:

    1. Monique Ebell & Christian Haefke, 2002. "Product Market Deregulation and Labor Market Outcomes," Working Papers 02.08, Swiss National Bank, Study Center Gerzensee.
    2. Kauppi, Heikki & Koskela, Erkki & Stenbacka, Rune, 2004. "Equilibrium Unemployment and Investment Under Product and Labour Market Imperfections," IZA Discussion Papers 1058, Institute for the Study of Labor (IZA).
    3. Heikki Kauppi & Erkki Koskela & Rune Stenbacka, 2004. "Equilibrium Unemployment and Capital Intensity Under Product and Labor Market Imperfections," CESifo Working Paper Series 1343, CESifo Group Munich.
    4. Amable, Bruno & Gatti, Donatella, 2000. "Is perfection optimal? Employment and product market competition," Discussion Papers, Research Unit: Economic Change and Employment FS I 00-304, Social Science Research Center Berlin (WZB).
    5. Marianne Bertrand & Francis Kramarz, 2002. "Does Entry Regulation Hinder Job Creation? Evidence from the French Retail Industry," The Quarterly Journal of Economics, Oxford University Press, vol. 117(4), pages 1369-1413.
    6. Zhiqi Chen & Bo Zhao, 2014. "Unemployment and product market competition in a Cournot model with efficiency wages," Canadian Journal of Economics, Canadian Economics Association, vol. 47(2), pages 555-579, May.
    7. Jo Seldeslachts, 2002. "Interactions Between Product and Labour Market Reforms," UFAE and IAE Working Papers 519.02, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
    8. Klaus Weyerstrass & Johannes Jaenicke, 2011. "Is more competition conducive to the macroeconomic performance in the euro area?," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 38(3), pages 351-380, July.
    9. Marcus Neureiter & Peter Nunnenkamp, 2010. "Outsourcing Motives, Location Choice and Labour Market Implications: An Empirical Analysis for European Countries -super-," Kyklos, Wiley Blackwell, vol. 63(2), pages 206-230, May.
    10. Petro Peretto, 2006. "The Employment (and Output) of Nations: Theory and Policy Implications," 2006 Meeting Papers 280, Society for Economic Dynamics.
    11. Oliver Budzinski & Jürgen-Peter Kretschmer, 2009. "Horizontal Mergers, Involuntary Unemployment, and Welfare," Working Papers 90/09, University of Southern Denmark, Department of Sociology, Environmental and Business Economics.
    12. Amable, Bruno & Gatti, Donatella, 2004. "Labour and Product Market Reforms: A Case for Policy Complementarity," IZA Discussion Papers 1190, Institute for the Study of Labor (IZA).
    13. Chen Jhy-hwa & Shieh Jhy-yuan & Chang Juin-jen, 2015. "Environmental policy and economic growth: the macroeconomic implications of the health effect," The B.E. Journal of Macroeconomics, De Gruyter, vol. 15(1), pages 1-31, January.
    14. Marco Arnone & Diego Scalise, 2005. "Macroeconomic Effects of Deregulation in Goods Market with Heterogeneous Firms," Macroeconomics 0512015, University Library of Munich, Germany.
    15. Koskela, Erkki & Stenbacka, Rune, 2012. "The relationship between product market competition and unemployment with profit sharing," Labour Economics, Elsevier, vol. 19(3), pages 291-297.
    16. Majumdar Sumit K., 2015. "Competitor entry impact on jobs and wages in incumbent firms: retrospective evidence from a natural experiment," Business and Politics, De Gruyter, vol. 17(2), pages 291-326, August.
    17. Amable, Bruno & Gatti, Donatella, 2001. "The Impact of Product Market Competition on Employment and Wages," IZA Discussion Papers 276, Institute for the Study of Labor (IZA).
    18. Kauppi, Heikki & Koskela, Erkki & Stenbacka, Rune, 2004. "Equilibrium unemployment and investment under product and labour market imperfections," Research Discussion Papers 11/2004, Bank of Finland.
    19. Natália Pimenta Monteiro, 2004. "Regulatory reform and the Portuguese banking labour market: two decades later," NIPE Working Papers 10/2004, NIPE - Universidade do Minho.
    20. Gersbach, Hans & Schniewind, Achim, 2002. "Uneven Technical Progress and Unemployment," IZA Discussion Papers 478, Institute for the Study of Labor (IZA).
    21. Erkki Koskela & Rune Stenbacka, 2005. "Product Market Competition, Profit Sharing and Equilibrium Unemployment," CESifo Working Paper Series 1603, CESifo Group Munich.

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